The only slight variation on that explanation that I can see would be that the Senate’s budget chiefs expect these proposals to fail. They can be killed by the House or by the governor’s veto or by voters, who would have to approve constitutional amendments before the proposals could take effect. Such a stunt may seem like a win-win for conservatives: either they succeed in providing property tax relief and paying down debt or they tried (at which point they will, perhaps, claim to have been thwarted by RINOs led by Joe Straus or by Abbott, who may, for all we know, face a 2018 primary challenge from Patrick).

Such a stunt might be an effective short-term political gambit. Immediately, Michael Quinn Sullivan of EmpowerTexans/Texans for Fiscal Responsibility approved the proposals; as predicted, he either fell for the ruse or is willing to play along out of tribal solidarity. Or it may not: the number of senators who have refrained from commenting makes me think that many of them are ambivalent, at least. And either way, I don’t think it’s respectable.

Meanwhile, on further reflection, I’ve become convinced that these proposals, if passed, would be profoundly damaging to Texas’s future, far more than simply overriding the cap would be. And I’ve become sincerely distressed that state leaders are willing to put so much at risk for no good reason—at the risk of being melodramatic, this is basically how I feel right now.

But I’ll address that tomorrow. Today I want to address the proposals themselves, because I’ve heard from a number of fiscal conservatives who are torn over the suggestion: they don’t like the idea of busting the cap, but they do like the idea of property tax relief and paying down debt. I understand that reaction, but if you look at the proposals in more detail, I’m not sure that either is a worthwhile reason to override the spending cap—much less sabotage it—from a fiscally conservative perspective.

1) The property tax part of this, by Jane Nelson, proposes to provide “tax relief” for homeowners by raising the homestead exemption. This is an honorable intention, and one that Patrick has been campaigning on since 2006, when he first ran for his Senate seat: property taxes vary by county, but on average, Texas has one of the highest property tax rates in the country. And in conjunction with rising property values in most parts of the state—as Patrick, to his credit, has often noted—property tax burdens are disproportionately hard on lower-income and middle-income homeowners. Those Texans will benefit from rising home values if they decide to sell, but in the meantime, they’re seeing their annual property tax payments soar. And even if they wanted to sell, which many don’t, it might be imprudent to do so, because as a result of rising property values, affordable housing is getting harder to find.

Again, I think this is an honorable concern. It’s also one that is more often associated with Democrats than Republicans; that’s why CPPP’s Dick Lavine was cautiously receptive, and TAB’s Bill Hammond dismissed it. Democrats aren’t being frivolous in raising this concern, and I give Patrick and Nelson credit for crossing party lines to join them on it. Shoot, while I’m at it, I’ll give Sullivan some credit too. He called me “lazy,” “liberal,” and a “shill” for my post on Wednesday, which was inexplicable and ironic, and more generally, I don’t think much of his math or his motives. But the one time we met in person, he expressed seemingly genuine concern over affordability and gentrification in Austin; I respected that.

With that said, the proposal is poorly structured from a fiscally conservative point of view. The “tax relief” in question wouldn’t go to the homeowners, directly. Property taxes are collected by the county, so raising the homestead exemption means that local governments will bring in less revenue; the state is proposing to make up the difference to the counties. That’s why it counts as state spending, and why it should. It should also be understood as a recurring biennial expense, unless anyone thinks that the county governments are going to suddenly start wanting less money. And since most of the state budget is effectively entailed already, the Lege should be careful about creating additional demands on its scarce resources; this was Rodney Ellis’s objection to Robert Nichols’ transportation funding proposal, and it was a valid one. Further, state subsidies for homestead exemptions have some of the same problems that conservatives see with Obamacare’s subsidies for health insurance. They don’t lower the costs (or in this case, the tax rates); they just mitigate the sticker shock. By doing so, they also mitigate any pressure for change, and may, as a result, exacerbate the overarching problem.

To be fair, the state-local disjunct makes property tax relief a necessarily tricky goal for the Lege to pursue. But there are other ways to pursue it. The one my colleague R.G. Ratcliffe wrote about earlier today, Eddie Rodriguez’s proposal to effectively means-test homestead exemptions, strikes me as a better approach. Rodriguez, as it happens, is my state representative, and if you’re walking your dog in our neighborhood, east Austin, it’s hard to dispute the idea that the young professionals with the homes that cost half a million dollars can afford Travis County property taxes more easily than the families living in tiny bungalows that were built in the 1940s and that could have been bought ten years ago for maybe $120,000, which is less than the land would cost today. But either way, from a fiscally conservative perspective, I’m not overwhelmed by the Senate’s proposal; I wouldn’t consider this a worthwhile reason to override the spending cap.

2) The second proposal, from Hinojosa, would exempt $3.9 billion from being counted against the spending cap, so the state can use that money to pay down debt. This is a straightforward priority, but I wouldn’t call it a pressing one. Texas does have one of the highest per-capita debt burdens in the country—but that’s if you’re talking about combined state and local debt. If you’re just talking about state debt, which is what Hinojosa’s proposing to pay down, we have one of the lowest debt burdens per capita, and although state debt has grown, it’s not grown as much or as quickly: the total state debt, as he notes, stands at $43.5 billion. Servicing that debt—paying back the principal plus interest—would cost $75.5 billion. Servicing the local debt, though? That’ll be $328 billion.

We’ll have to pay the state debt back eventually, and $3.9 billion would be a start. But if the Senate was proposing to override the spending cap to pass a budget that includes $3.9 billion for servicing state debt, I’d still be wary. It doesn’t seem necessary; if it was, why not draw down the $3.9 billion from the rainy day fund? It creates significant fiscal risk for the 2017 session; although I don’t think Texas is going to fall into recession, economic growth will probably slow over the next two years, and we’d proably be better off keeping the extra $4.5 or $5 billion as a hedge against a potential shortfall.

As for the idea of exempting debt service from being counted against the spending cap, that’s where my more serious concerns start. A one-time $3.9 billion outlay wouldn’t create a recurring demand in the way that the homestead exemption subsidies would, but it would create an extremely risky precedent. It would encourage future Legislatures to shift all its extra spending with borrowed money: if the 84th Legislature approves the idea that debt service doesn’t count against the spending cap, we might as well not even have a spending cap any more. That’s why, beyond the politics, I think last week’s proposal has the potential to be profoundly damaging to Texas’s future: the spending cap has been good for Texas. It’s worth preserving. If the Senate scraps it, they’ll be sacrificing more than just short-term fiscal discipline. Tomorrow, I’ll elaborate on what’s at stake.

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Comments

Jed

of course it’s not conservative. that is well established. but it is republican.

WUSRPH

The basic problem with these proposals–and especially with SB 5/SJR %–the highway funding plan—is that tie the hand of future legislatures to react to changing needs. As you note, most of the state budget is already set in advance by either constitutional or statutory dedications. Some estimates put the amount of the state budget that is pre-determined by those dedications at more than 70% and Sen. Watson estimated that SJR 5 would raise that to 82%. That means that future legislatures would actually have the power to determine only $18 out of every $100 in the budget and would have to change laws or the constitution in order to change the way dollars are appropriated should new needs arise or, which is more likely with the present crew in power, cut the few areas of the state budget over which the Leg. does have some control—like public education (which it cut during the last alleged budget shortfall session).

There can be only two reasons for this rush to tie the hands of their successors—either today’s senators believe their successors won’t be as smart as they are when it comes to determining the state’s budget needs or they are using constitutional amendments to fund highways, property tax relief and tax cuts in order sidestep the spending cap and allow future legislatures to spend more than would otherwise be the case. Either reason is bad public policy.

P.S. I was surprised to see that you said that MQS has endorsed the idea. I had not seen any public comment from him previously and, based on his past positions, sidestepping the spending cap should be something he finds abhorrent. I can only think that the “leadership” (sic) has made a deal to include the proposal to even tighten the spending cap in this package, as Senator Konni Burton suggested late last week.

We have not endorsed the idea; Erica has created a fiction. I expressed concern about the practical effects of SB15, not support. Texas Monthly cannot be troubled with facts when doing anything but reviewing BBQ joints.

WUSRPH

I just read your statement and agree that it does not say “Yes” to the ideas…but it doesn’t really say “NO” either. Based on your existing call for folks to call on their legislators not to bust the cap this session, I would think you would not like these proposals to sidestep the cap for these special spending purposes, especially when there are sufficient funds to fund the tax cuts, the tax relief and the new money for highways without the need to amend the constitution. (Don’t you like how Sen. Nelson is being more than truthful in calling her plan “property tax relief” rather than “property tax cuts’? Of course, much of the public will not appreciate the difference…but it is nice to see her not trying to mislead them.)

Erica, it seems, cannot be bothered to get the facts right. In my post about SB15, I expressed our concerns about the actual language. While accepting the senators’ expressed intention to ensure tax relief doesn’t count as spending, I expressed concern that the bill could well have “the opposite outcome intended with SB15” and suggested that taxpayers should “watch the language carefully as it moves through the legislative process.”

Erica Grieder

1) The tax relief should count as spending, for the reasons I described in the post.
2) I share your concerns about unintended consequences–and I would bet a lot of money that such concerns would be realized
3) You have Nelson (and Hinojosa and Eltife) down as “no response” on dontbustthecap.com. Insofar as they’re the ones proposing this scheme, I guess they’re not responding to it, but it’s not as if we don’t know their stance: they’re the three who have signed on to busting the cap.

When the reality & consequences come back to hit TX, which statewide officeholder will be the fall guy or girl down the road ?

José

Sir, it seems that your blunt language in criticizing TM could be put to better use in stating your position more clearly on this matter. It’s wonderful that you “express concerns” about this and that. How about taking a firm stand on spending caps, yea or nay, with ample explanation?

Erica Grieder

I agree. Michael, your post concludes by saying that it’s important to “watch the language carefully”–that implies that your concerns are about the execution, not the concept.

Texas Publius

Michael Queen Sullivan and Danielle Patrick were against legislatively busting the spending cap before they were for enshrining the busting of the spending cap in the state constituion.

Don’t worry Lt Guv Dan Patrick will clean up the mess left behind by democrats….

dave in texas

But you keep saying over and over that Democrats haven’t won an election in 20 years. If there’s a mess to clean up, and there most certainly is, it has to have been made by the Republicans. Christ, you can’t even keep up with your own bulls**t.

John Bernard Books

You need to keep up AND learn, democrats riding the coat tails of Obama set Texas back 20 years by electing Joe Straus Speaker in 2008. Democrats didn’t win a statewide election in ’08 but they did sneak in and steal a few seats. Lt Guv Patrick and Guv Abbotts’ beatdown of the dems in 2014 have us headed back on the right track. Now back to cleaning up the dem’s mess.

So there is no confusion—as it anyone cared—my position on these measures is that I oppose them, but probably not for the reason some would. I oppose them because:

(1) They would tend to tie the hands of future legislatures (in the case of SJR 5) when those hands are already too tied by existing dedications. The legislature needs more flexibility to meet changing needs, not less and SJR 5 would lock up more than $2.5 billion more. If I am to believe in a representational democracy form of government, I must be willing to allow the elected representatives (within limits set by the constitution) to be free to make the decisions they are elected to make. Dedicating funds suggests that we do not believe we can trust our elected officials to make intelligent choices or hard choices when the time requires.

(2) Although I oppose constitutional spending limits in principle (believing in the need to give the legislators the power to make choices), if we have them it is hypocrisy to say we are honoring them while deliberately taking steps to sidestep the limit to allow certain kinds of spending as these proposals are intended to do. To me the worst sin a legislator can commit (other than criminal offenses and stupidity) is hypocrisy….and these proposals are blatant examples of that sin.

James Quintero

Interesting read — one small correction though. Local government debt has reached $333.1 billion according to the latest BRB data. That’s one-third of one trillion dollars and growing